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Economics of Defense

Interview with a Personnel Visionary

I recently had the chance to interview Mr. Mike Colarusso of the United States Army’s Office of Economic and Manpower Analysis (OEMA), a leading organization in the study of military-economic issues. Colarusso, a retired lieutenant colonel, historian and research analyst, has co-authored a compelling series of papers for the U.S. Army War College’s Strategic Studies Institute with Colonel Dave Lyle, a professor of economics at West Point and director of OEMA. Their publications apply economic principles to the military’s industrial age personnel system.

Topics include talent based branching of newly commissioned officers, the optimization of retention tools and bonuses, and the management of senior officer talent. All are worthy of serious study for those interested in how the military must adapt its personnel system to meet the demands of the 21st Century. MILopoly wishes to thank LTC Raymond Kimball for his assistance in setting up the interview.

The views expressed are personal in nature and do not reflect those of the Department of Defense, U.S. Army, or USMA.

MILopoly: Your writing focuses on optimization of the human capital of the Army, though much of the focus is on the officer cohort. Could you talk a little about your vision on how that group is optimally complemented by Army NCOs, Warrants, and Civilians?

Colarusso: Our initial focus upon active component officers began almost a decade ago. It stemmed from an analysis of the challenges confronting that particular segment of the Army workforce, challenges that both Congress and the larger defense establishment were keen to understand and meet. Because active duty officers exercise an outsized influence upon policies across the total force, we believed this was a good place to begin. Getting talent management right with this population would create program and policy leaders who could extend the benefits of talent management to the other segments of the Total Army workforce – Guard, Reserve and Civilians.

That said, while many of the talent management principles we prescribe for officers generalize to any workforce, each Army workforce segment is confronted with different challenges, so attempting to apply talent management solutions uniformly to all of them could do as much harm as good. Optimizing performance via talent management begins and ends with a root cause analysis of the problems confronting a group of workers – what’s making them less productive, and why? The Army is now engaged in that type of granular analysis of its other workforce segments.

What are your thoughts on the lateral hiring of civilian executive talent into senior Army flag officer billets? Would Army culture support such a move?

While we think there are tremendous opportunities to increase lateral entry into the officer ranks as late as mid-career, we wouldn’t recommend it in competitive category positions at the most senior levels. It’s not a question of whether the culture would accept it or not, but rather an acknowledgment that the Army is a land combat profession. Its senior leaders are the stewards of that profession. If they aren’t onboarded into the profession as young professionals, if they aren’t given the opportunities to internalize the values and ethos of the profession and to understand and master the tenets of military leadership, we believe that they would be severely disadvantaged as senior leaders.

This long employment experience also shapes the utility senior officers derive from the intrinsic rewards of military service, something we believe would markedly differ with laterally entered civilian executives. Lastly, “just in time” hiring of senior executives would in some ways remove the institutional incentive to thoughtfully develop and manage officers for a career of service culminating in senior leadership. What we would advocate to increase expertise in the senior ranks is to end the practice of treating all generals as “generalists” and afford them the developmental opportunities and continuing higher education needed to make them more effective enterprise leaders. We also think that succession planning and increased tenure in positions of strategic import would give flag officers the time span of discretion needed to implement strategies and lead change.

Could you expound on what you mean by enterprise leaders? Would this mean grouping by “tracks”, similar to those junior officers follow within their branches?

By enterprise leaders, we mean those who run the Army and are stewards of the Army Profession. Above and beyond the ability to lead or think strategically, this level of work also requires deep functional expertise in budgets, logistics, economics, law, public affairs and outreach, acquisition, research and development, human capital management, politics, statecraft, civil-military relations, foreign affairs, society and culture, regional and global threats, etc.

To get the right leaders to the top of the profession requires inventorying officer talents from commissioning forward, which over time could then be better aligned within the branches, functional areas and career fields. But we’d suggest not allowing such formal designations to handcuff the officer management system. If officers’ innate abilities, personal experiences, family or cultural background, volunteer endeavors, hobbies or education suited them particularly well for work outside of a formal branch or career field, the Army should be able to assign them accordingly. You could think of this as “talent-based” succession planning – not choosing officers for positions, but instead selecting them for the work at hand.

In your article on military compensation, you suggest a new rubric for optimizing the military pay structure. As you developed that product, what were your assumptions on how the external labor market influences officers’ career choices at the Colonel and General Officer levels? Do you believe that most officers tend toward inertia and “riding it out” by awaiting promotion results before considering career moves, or do you feel that there is a constant mental calculation about whether to jump ship for the civilian sector after a certain point in one’s career?

I’m the non-economist of our group, so please consider that as you read my answer, but at the moment it’s hard to know which senior officers are a flight risk due to the information asymmetry disadvantaging the Army. As an institution, it doesn’t know its individual employees particularly well, which makes wage contract negotiations perilous. The Army can eliminate this asymmetry via diligent talent management, but until then it can only guess at what’s in the minds of its senior officers. To make that guessing game a little less risky, we should consider three things:

First – the officer population is highly heterogeneous. Therefore, do not assume that officers value all benefits equally (or cash above all).

Second – rational choice theory suggests that to retain officers with high opportunity costs, intrinsic rewards matter, as senior officer pay and benefits are generally outstripped by private sector compensation packages. Talent alignment – allowing officers to do meaningful work that they are actually suited for, goes a long way towards providing the intrinsic rewards of military service that other employers would be hard pressed to match.

Lastly – redesign the current military pension and benefits system because it actually encourages human capital flight once an officer becomes retirement-eligible: the benefits kick in too early.

Also in that article you suggest a more rigorous approach to Professional Military Education (PME), in both selection and curriculum. Do you feel that there is a risk of burnout for officers already expected to navigate a challenging sequence of Key Developmental Positions en route to compete for senior positions?

No. We actually speak about this at more length in Chapter 6 of Senior Officer Talent Management: Fostering Institutional Adaptability (SOTM, 2014), and we tie it to other talent management proposals. In a nutshell – the notion of using accredited, degree-granting institutions as a “take a knee” moment in an otherwise fraught career timeline is the polar opposite of what’s needed in a profession.

An institution of higher learning with virtually a 100% graduation rate is either doing an outstanding job of screening its attendees or is doing a lackluster job and then dropping course standards to the lowest common denominator. In the case of PME, evidence suggests it’s the latter (see SOTM). PME is an incredible opportunity to learn a ton of information about our people’s talents while simultaneously putting them through their intellectual paces while doing so. It’s also a missed credentialing opportunity – as signal theory explains, a credential with no rigor tells us nothing about the productive potential of the person holding it. Professions certify and credential their people.

While on the topic of PME, I have long thought that an education in the principles of economics provides an excellent platform for military officers to conceptualize the decisions they face. From understanding the economics of a country or region in which they are operating, to understanding the concept of opportunity costs as they relate to plans and programs, economics is a multifaceted tool. Given the opportunity, would you inject more economics into the PME curriculum? If so, where and how?

Specific PME curriculum design is not something we’ve devoted an outsized share of our thinking to, but yes, we’d agree that in the Information Age the ability to “think like an economist” is useful, even necessary. Increasing access to high quality data makes it possible for senior leaders to have a better command of the facts when making decisions. Thinking analytically, intellectual curiosity, the ability to develop and test hypotheses or to conduct root-cause analysis of problems – these are talents we should cultivate in our senior leaders.

We want them to exercise their subjective judgment (if not, we’d suggest having robots run the Army). But we want them to have access to objective, methodologically valid data when doing so. And we want them to challenge underlying assumptions by asking the right questions. PME redesign that engenders or unlocks these talents would be welcome, although it’s possible to hone these abilities in other ways. In particular, we think resident, graduate-level education at top-tier civilian universities should become a more integral part of “professional military education.”

Your article on creating a more effective regional alignment strategy was released in 2014. Since that time, the priorities of the Army have shifted toward a high emphasis on readiness, and remains mired in an industrial age personnel management model. Given the challenges you enumerate, and the seeming disconnect between ready units and conducting non-Mission Essential Task List (METL) regional engagement activities, do you feel that the Regionally Aligned Force (RAF) construct is sustainable?

As I think we touched upon in that article, in the last thirty years the Army has alternated between two approaches – the regionally aligned forces model during the reasonably steady equilibrium of the post-WW II Cold War era, and the modular “plug and play” approach of the post-9/11 world. Today’s RAF approach in some ways seems to be a hybrid of these earlier approaches. Is it sustainable in a world that changes as rapidly as it does today? I don’t know. I do know, however, that any approach to meeting regional threats has an exponentially better chance of success if the Army has a full inventory of the talents already resident in its labor force. This is a critical risk management tool in an uncertain world. If you can see your talent, you can organize it rapidly to meet unforeseen global contingencies.

In that same article, you state that “ARFORGEN fails to appreciate that despite standardization, each BCT is a unique collection of indi­viduals. Its outsized focus upon ‘plug and play’ in­terchangeability fails to leverage that uniqueness.” How can the Army address the institutional need for some degree of unit standardization (i.e. doctrinal support, training standards) while getting the most out of its people at the individual level?

In the talent management taxonomy that we’ve proposed for the Army, we suggest that there are in essence two tiers of talent acquisition, development, employment and retention. The first tier is baseline – if you want to be an infantryman, for example, you need to be able to shoot, move and communicate, to have a level of physical fitness almost on par with a professional athlete, and to multi-task and problem-solve in the “crowded hour.” But to undertake an infantry military training team mission in Ukraine, a second tier of necessary talents might include Eastern European cultural fluency, an understanding of the history and geo-politics of the region, experience conducting operations in marshlands like those of Ukraine’s Pripyat, etc.

A uniformed service is always going to have a baseline of uniform standards, but the complexity of the global environment demands we layer specialized talents upon these. As a nation of immigrants that’s continental in scope and possessed of the world’s best university-level education system, we’re pretty fortunate. Our Army is more likely than those of our adversaries to possess the heterogeneous talents needed to respond to complex regional challenges. But we need to be able to see those talents, and we really can’t at the moment

Out of curiosity, in your research have you come across examples of other militaries, today or yesterday, that have gotten the talent management proposition “right”? Something for the U.S. to borrow from?

Well, when you consider the way General Marshall managed officers while presiding over a 40-fold increase in the force during World War II, you definitely see some of the talent management principles we espouse in operation. Valuing continuing education, differentiating officers by talent and then assigning them to positions based upon those talents rather than seniority, looking down the bench to mid-career officers for potential generals, pushing through significant personnel management adaptations in response to an existential threat – these are hallmarks of a talent management approach.

As for other militaries, most western armies manage their people in somewhat similar fashion to ours, although there are of course innovations here and there that we could certainly benefit from. But there’s no one army that stands out as the “talent management exemplar,” at least not in the research we’ve done so far. It’s pretty clear, however, that potential adversaries are taking new approaches to human capital management. The evidence is in their increased military capabilities. The Chinese are pivoting from a mechanization focus to an information age approach, with heavy emphasis upon STEM education. The Russians are leading in certain aspects of armor, missile and fighter aircraft design. The Iranians can hack into RQ-170 Sentinels. The North Koreans are developing a true nuclear ballistic missile capability. And all of these nations also possess sophisticated cyber warfare capabilities.

These developments show that potential threat forces are operating closer to the military technology frontier than ever before. While open markets and espionage have certainly contributed to their technological advancements, the Chinese and Russians in particular do not seem content with mimicry of western technologies. They are working to create truly innovative militaries, thought leaders in their own right. The true revolution in military affairs isn’t a “mil-tech” one but a “skill-tech” one. We can’t maintain our technological ascendancy unless we maintain and exploit the human capital advantage a free society always enjoys. That’s why a talent management approach is so critical.

Finally, the Army has been notoriously bad at predicting the next conflict. How can we best select, train, and educate the next generation of officers to operate in a future yet unwritten?

A couple of things leap to mind. One, provide more higher education – teach officers how to think, not what to think. Two, provide individual career paths tailored to each individual. Don’t keep running to developmental corner solutions, or you’ll end up with an officer corps so homogenous in thought and ability that it can’t meet a range of challenges outside of its comfort zone. A variety of talent is the best way to reduce risk in an uncertain world.